Forex Risk Management Strategies

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Forex Risk Management Strategies
Gopal Sen

Glopinion by

Gopal Sen

Dec 5, 2014

It is unlike anything else in the financial world. That is what Forex trade is. The financial market has speed, volatility, and an enormous size, which makes it the most transacted market in the world. As you trade in this mammoth market, you should always remember that, this market has no control, and is not a single event. It is not an individual, and there are no factors ruling this investment market.

It is unlike anything else in the financial world. That is what Forex trade is. The financial market has speed, volatility, and an enormous size, which makes it the most transacted market in the world. As you trade in this mammoth market, you should always remember that, this market has no control, and is not a single event. It is not an individual, and there are no factors ruling this investment market. Trading in this market is enjoyable, just like any other speculative market, and the level of risk that you take brings you the chances of higher profit or loss.

Understanding Forex Risk Management - http://www.investopedia.com/articles/forex/10/forex-risk-management.asp

Forex market is very inconsistent and volatile. Currency exchange rates can fluctuate anytime in any direction. The currency may become expensive or many fall flat in matter of days, hours, or even in minutes. This unpredictability creates the interest in the traders to trade in this market. But ask yourself if you had taken the risk factors in account when you invested in the Forex market. When you have terminated, closed or exited your position, you must have understood the risk that you were taking in investing. If not, you may lose heavily on your investment. There are few factors which define risk and these include:

1. Unexpected currency rate corrections.
2. High level of variations in foreign exchange rates.
3. Volatile markets offering profit opportunities.
4. Lost payments.
5. Delayed confirmation of payments and receivables.
6. Divergence between bank drafts received and the contract price.
7. There are areas that every trader should cover both BEFORE and DURING a trade.

You can make an exit from the Forex market at a pre-determined profit target. This is known as "limit” orders, or "profit take” orders as it is sometimes called. As you know, Forex trading allows you to "short sell", and in doing so the trading system would allow you to place a "limit” order only at a price below the current rate of the currency. This is because it is taken as the profit zone. On the other hand, if you have placed a "long” buy for a currency pair, you will be allowed to place a "limit” order above the ongoing currency rate.

If you want to trade in Forex you would need to get conversant with the system and with the meaning of the terms utilized in that system. Forex trading is a very profitable proposition, but it requires you to be trained, and understand the process, gathering experience of what you have learnt. As you go on investing, you should try to analyse and understand whatever result you get out of your investment. This is the way you gather experience and become an able trader in the Forex market.

Learning how to manage risks in Forex trade - http://www.cmsfx.com/en/forex-education/online-forex-course/chapter-3-technical-tools/risk-management-creating-trading-methodolgy/risk-management-techniques/

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